Asian markets struggle as easing inflation fails to boost optimism


Asian markets fluctuated Friday as traders weighed a range of issues including US debt ceiling hopes, high-level talks between Washington and Beijing, banking sector uncertainty and more signs of a slowing economy.
Investors hoping the Federal Reserve will finally take a breather from its long-running campaign of interest rate hikes have been left feeling a little more confident this week after data showed inflation on both a consumer and wholesale level continued to ease in April.
Their hopes were given a further boost Thursday by news that jobless claims last week hit their highest since October 2021, suggesting the labour market was showing some slack.
The Fed has long said it needed to see a softening in employment as well as a drop in inflation before it could consider ending its rate hike drive and look at a potential cut in borrowing costs.
“US economic data overnight continued the theme of tentative signs of a softening labour market and room for optimism about the inflation outlook,” said National Australia Bank’s Taylor Nugent.
“Caution on one week’s claims number is always well advised, but the incremental signal looks to be a more compelling trend higher.”
There was also some positive news out of Washington that US National Security Advisor Jake Sullivan and top Chinese diplomat Wang Yi met in Vienna this week, as the superpowers seek to temper tensions over a number of issues, particularly Taiwan.
The eight hours of talks over Wednesday and Thursday also covered Russia’s invasion of Ukraine and capped an unofficial pause in high-level contacts since the United States shot down a Chinese surveillance balloon earlier in the year.